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by Robert F. Sharpe, Jr.
As the new year unfolds and
the fund-raising efforts of
2008 are tallied, we see mixed
results. Some are up, some are down,
and some are flat. But one thing is
certain—2009 will not be business
as usual.
History indicates giving in
America tends to hold relatively
steady during recessionary periods,
and may not decline as much as the
overall economy. We are no longer in
an environment, however, where a
rising tide will raise all boats.
The key to success in today’s
environment is knowing where to
focus efforts in ways that will produce
the most funding, and what to trim
to maximize those results. Some
cuts are obvious. Lavish events, for
example, may be the first to go. Or
perhaps development officers should
now add a day or two to a trip and
use the time to make additional
donor visits or combine visits with
training or other needs, and therefore
stretch one airline ticket to do
the work of two.
With a little planning and creativity,
it may be possible to cut costs
without a commensurate reduction
in funding.
Here’s a cost-saving idea you’ll
probably hear: “Why not cut the
planned giving program?” After all,
it takes years to show results from
such efforts, and this can always be
done later when the dust settles.
Now is the time to focus on the “real
money.”
Unfortunately, to a greater or
lesser extent, in the coming months some will take this approach—an
approach that is completely understandable
in light of some of the
recent misdirected “advice” of
“experts” in the field.
If a major priority of your
organization or institution is to
encourage notification of bequest
expectancies from 45-year-olds, then
“pausing” costly efforts to market
such gifts may make a lot of financial
sense in today’s environment.
For many, however, their planned
giving program represents a framework
for helping donors make gifts
as part of their final estate plans.
In addition, it may include
helping donors of all ages make
near-term gifts while confronting
and neutralizing natural financial
objections that may otherwise
preclude the completion of those
gifts. If this describes your situation,
then your planned gift efforts may
have never been more critical.
The best gift planning efforts
represent ways to help donors make
larger gifts they genuinely want to
make during times when their usual
methods of giving may seem too risky
or would deplete their resources
before first meeting other needs.
An “extended” pledge?
For example, which might a donor
prefer—a pledge that requires five
annual payments of $100,000, or an
alternative gift such as a transfer of
low-yielding stock through a simple
agreement that immediately reduces
the donor’s tax burden, provides a
predictable, fixed income for five
years, and then funds a $500,000
endowment with a single transfer
at the end of a five-year campaign
when the donor also retires?
Is this a “major” gift? A “campaign”
gift? An “endowment” gift?
A “special” gift? A “leadership” gift?
An “alternative” gift? Or is it a
“planned gift?”
Do you present this to a donor
as an opportunity to fund a fiveyear,
term-of-years charitable
remainder annuity trust? Or do you
ask if they might be interested in a
“balloon pledge?”
What about bequests?
Cutting mass marketing of
bequests to people with 30- to 40-year
life expectancies is a move that can
help reduce costs without negatively
impacting results in the near term.
See the summary of the recent
survey conducted by the American
Council on Gift Annuities on page 4.
The ACGA concluded that targeted
mailings were one of the most effective
ways to encourage bequests and
other planned gifts.
Study after study reveals that
wills that actually leave funds to charity are most often completed
by persons in their late 70s to early
80s. Forty years of in-depth research
by Sharpe consultants on thousands
of realized bequests indicates that
approximately 50% of them came
from a person who executed their
will within three years of death.
The chart illustrates lag
times for over 4,000 estates from
35 selected organizations representing
education, healthcare, religion,
social services, and other types of
organizations.
This is why influencing a
relatively small group of older, long-term
donors who are at the point in
life where they are making their final
plans can positively impact your
results within three to five years.
But what about earlier wills?
Don’t you want to be in the first will?
Of course you do! People normally
write wills throughout their lives
when they marry, have children,
retire, or lose a spouse.
People’s interests change over
time, however, and they actually
leave funds to the charities that
they are actively supporting at the
time they execute their last will.
If the charities they supported
earlier in life, and included in
earlier wills, remain a part of
their lives, then those charities will
likely still receive a bequest. If, on
the other hand, the donors’ charitable
interests changed over time, their last wills may include a
different set of charities than their
first wills.
There are other more cost-effective
ways to keep the bequest
message in front of younger people
(the web, for example).
Programs mailing bequest packages
to donors in their 50s or even
younger may be able to save a great
deal of budget money by letting the
Baby Boomers and X’ers mature a
few more years. Keep in mind that a
45-year-old enjoys a life expectancy
of just under 38 years.
Where were you in 1971?
Where will you and your
organization be in 2047?
Many managers have
understandably concluded,
however, that continuing
to target age-appropriate
messages to a smaller group
of donors with life expectancies
of 10 years or less on
average may be a more
cost-effective use of scarce
bequest marketing funds.
Gift annuity communications
efforts should be targeted in much the
same way. Now might be the time for
those marketing gift annuities to
younger persons to step back and
analyze their results to see how many
annuities have actually been completed
by those under the age of 70.
Take a look at these numbers
and then determine whether the gift
annuity marketing dollars directed
to younger people might be better
spent on more donor visits and other
activities that may yield results sooner.
Where your younger donors are concerned, it may be more
productive to target appropriate
persons with information about
deferred gift annuities, term-of-years
trusts, life income gifts for
older relatives, gifts of securities,
charitable lead trusts, and other ways to give that they might find
more useful in today’s environment.
Defining your future
If planned giving includes substantial
funds aimed at encouraging
younger donors to make gifts that
will not be realized, on average,
until they pass away in four decades
or longer, then you may find this is
a legitimate place to make some
strategic cuts.
If, on the other hand, you
want to help donors give to your
organization in the most efficient,
cost-effective way for a person of
their age and wealth profile, you
will cut planned giving at your organization’s
immediate and long-term
peril.
Nonprofit organizations and
institutions that survived and prospered
during the Great Depression
did so, in many cases, because their
income from bequests and other
planned gifts grew faster than other
gifts declined. Bequests and other
estate-based gifts influenced in 1931
resulted in useable funds in many
cases by 1935.
These gifts came from committed
donors, many of whom were moved
from the current to deferred gift
category late in life due to economic
circumstances.
Today we must all conserve
resources in every way possible.
But we must conserve in ways that
continue to provide donors and their
advisors with the assistance they
need to make the gifts, both current
and deferred, that they still want
to make to the organizations and
institutions they care most about.
Editor’s note: The content of this article is
based on information in the popular Sharpe
seminar “Planning Major Gifts.” For more on
giving during economic downturns, see www.sharpenet.com/uncertaintimes.
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